The shortfall in Highway Trust Fund collections : hearing before the Subcommittee on Investigations and Oversight of the Committee on Public Works and Transportation, House of Representatives, One Hundred Third Congress, second session, August 10, 1994

130 Pages·3.8 MB·English

by  United States. Congress. House. Committee on Public Works and Transportation. Subcommittee on Investigations and Oversight

THE SHORTFALL IN HIGHWAY
TRUST FUND COLLECTIONS
(103-72)
Y 4.P 96/11:103-72
« The Shortfall in Highuay Trust Fund... ^^Q
BEFORETHE
SUBCOMMITTEE ON
INVESTIGATIONS AND OVERSIGHT
OFTHE
COMMITTEE ON
PUBLIC WORKS AND TRANSPORTATION
HOUSE OF REPRESENTATR^S
ONE HUNDRED THIRD CONGRESS
SECOND SESSION
AUGUST 10, 1994
Printed for the use ofthe
Committee on Public Works and Transportation
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1994
ForsalebytheU.S.GovernmentPrintingOffice
SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC 20402
ISBN 0-16-046454-4

^
THE SHORTFALL IN HIGHWAY
TRUST FUND COLLECTIONS
(103-72)
Y4.P 96/11:103-72
The Shortfall in Highuay Trust Fund... S^Q-
BEFORETHE
SUBCOMMITTEE ON
INVESTIGATIONS AND OVERSIGHT
OFTHE
COMMITTEE ON
PUBLIC WORKS AND TRANSPORTATION
HOUSE OP REPRESENTATIONS
ONE HUNDRED THIRD CONGRESS
SECOND SESSION
AUGUST 10, 1994
Printed for the use ofthe
Committee on Public Works and Transportation
'\::
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1994
ForsalebytheU.S.GovernmentPrintingOffice
SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC 20402
ISBN 0-16-046454-4
COMMITTEE ON PUBLIC WORKS AND TRANSPORTATION
NORMANY. MINETA, California, Chair
JAMESL. OBERSTAR,Minnesota BUD SHUSTER, Pennsylvania
NICKJ. RAHALLII,WestVirginia WILLIAMF. CLINGER,Jr., Pennsylvania
DOUGLASAPPLEGATE, Ohio THOMASE. PETRI,Wisconsin
RONDE LUGO,Virgin Islands SHERWOOD L. BOEHLERT,NewYork
ROBERTA. BORSKI, Pennsylvania JAMESM. INHOFE, Oklahoma
TIMVALENTINE,NorthCarolina BILLEMERSON, Missouri
WILLIAMO. LIPINSKI, IlUnois JOHNJ. DUNCAN,Jr.,Tennessee
ROBERTE. WISE,Jr.,WestVirginia SUSANMOLINARI,NewYork
JAMESA. TRAFICANT,Jr.,Ohio WILLIAM H. ZELIFF,Jr.,NewHampshire
PETERA. DeFAZIO,Oregon THOMASW. EWING, Illinois
JAMESA. HAYES, Louisiana WAYNET. GILCHREST,Maryland
BOB CLEMENT,Tennessee JENNIFERDUNN,Washington
JERRYF. COSTELLO, Illinois Y.TIMHUTCHINSON,Arkansas
MIKE PARKER,Mississippi BILLBAKER, California
GREG LAUGHLIN,Texas MICHAELA. "MAC"COLLINS,Georgia
PETE GEREN,Texas JIM KIM, California
GEORGE E. SANGMEISTER,Illinois DAVIDA. LEVY, NewYork
GLENNPOSHARD, Illinois STEPHENHORN, Cahfornia
DICKSWETT,NewHampshire BOBFRANKS,NewJersey
BBAURDBACRRAA-MREORS,EAlCaObLaLmIaNS, Michigan PHEOTWEARRID. BP.LU"TBEU,CKM"asMsaccKhEusOeNt,tsCahfornia
ELEANORHOLMESNORTON,Districtof JOHNL. MICA,Florida
Columbia PETERHOEKSTRA, Michigan
LUCIENE. BLACKWELL, Pennsylvania JACKQUINN, NewYork
JERROLDNADLER,NewYork VERNONJ. EHLERS, Michigan
SAM COPPERSMITH,Arizona
LESLIE L. BYRNE,Virginia
MARIACANTWELL,Washington
PATDANNER, Missouri
KARENSHEPHERD,Utah
ROBERTMENENDEZ,NewJersey
JAMESE. CLYBURN, SouthCaroUna
CORRINE BROWN,Florida
NATHANDEAL,Georgia
JAMESA. BARCL\,Michigan
DANHAMBURG,California
BOBFILNER, California
WALTERR.TUCKERIII,California
EDDIE BERNICEJOHNSON,Texas
PETERW. BARCA,Wisconsin
Subcommittee on Investigations and Oversight
ROBERTA. BORSKI,Pennsylvania,Chair
BARBARA-ROSE COLLINS,Michigan JAMESM. INHOFE, Oklahoma
Vice Chair JOHNJ. DUNCAN,Jr.,Tennessee
ROBERTE. WISE,Jr.,WestVirginia SUSANMOLINARI, NewYork
LUCIENE. BLACKWELL, Pennsylvania WILLIAM H. ZELIFF,Jr.,NewHampshire
LESLIE L. BYRNE,Virginia WAYNET. GILCHREST,Maryland
JAMESA. BARCIA,Michigan BILLBAKER,California
BOBFILNER, California BUD SHUSTER, Pennsylvania
PETERW. BARCA,Wisconsin (ExOfficio)
GLENN POSHARD, Ilhnois
(Vacancy)
NORMANY. MINETA,Cahfornia
(ExOfficio)
CONTENTS
TESTIMO^fY
Page
Aikman, John, Administrator, Criminal Investigation Division, Indiana
DepartmentofRevenue,Indianapolis,IN 32
Arnold, John, President, Petroleum Products Corporation, on behalfof
PetroleumMarketersAssociationofAmerica 40
Brand, Phil, ChiefCompliance Officer, Internal Revenue Service, accom-
panied by Donald K. Vogel, Assistant Commissioner, Criminal Inves-
tigation, and Marshall V. Washburn, Executive Director, Specialty
Taxes 22
Columbus, R. Timothy, Collier, Shannon, RiU & Scott, Counsel, Society
ofIndependentGasolineMarketersofAmerica 40
Garvey,JaneF.,DeputyAdministrator,FederalHighwayAdministration,
U.S. Department ofTransportation, accompanied by James R. Link,
Chief,HighwayRevenueAnalysisBranch 10
Lovom, Charles, Group Vice President, Marketing, Ashland Petroleum
Co.,onbehalfoftheAmericanPetroleumInstitute 40
Marchbanks, Patrick, Chairman, Bruce's Truck Stops, on behalf of
NATSO,Inc 40
Prokop,John,President,IndependentLiquidTerminalsAssociation 40
Shuirman, Dale A., Director, Motor Fuel Tax Administration, Delaware
DepartmentofTransportation,Dover,DE 32
PREPARED STATEMENTS SUBMITTED BYMEMBERS OF CONGRESS
Barcia,Hon.JamesA.ofMichigan 20
Blackwell,Hon. LucienE.,ofPennsylvania 2
Mineta,Hon.NormanY.,ofCalifornia 8
PREPARED STATEMENTS SUBMITTED BYWITNESSES
Aikman,John 55
Arnold,John 57
Brand,Phil 63
Columbus,R.Timothy 77
Garvey,JaneF 84
Lovom,Charles 92
Marchbanks,Wm.Patrick 99
Prokop,John 106
Shuirman,DaleA Ill
SUBMISSION FOR THE RECORD
Blackwell, Hon. Lucien E., a Representative in Congress from Pennsylvania,
article, "Coping with Cheats, Change", National Petroleum News, Septem-
ber1993 4
ADDITION TO THE RECORD
AmericanTruckingAssociations,Inc.,statement 116

SHORTFALL IN fflGHWAY TRUST FUND
COLLECTIONS
WEDNESDAY, AUGUST 10, 1994
House of Representatives,
Subcommittee on Investigationsand Oversight,
Committee on Public WorksandTransportation,
Washington, DC.
The subcommittee met, pursuant to call, at 9:35 a.m., in room
2175, Rayburn House Office Building, Hon. RobertA. Borski (chair-
man ofthe subcommittee) presiding.
Mr. Borski. The subcommittee will come to order.
The subcommittee today will be reviewing the growing problem
offuel tax evasion and whether Federal and State efforts to reduce
and eliminatetaxevasion have worked.
This is the third hearing this subcommittee has held in the last
sixyears on this illegal practice that diverts billions eachyearfrom
the Federal Highway Trust Fund and billions more from State pro-
grams.
Fuel tax evaders are simply stealing from the American people.
For every dollar that is stolen through illegal tax evasion
schemes, adollarofcosts will be shifted to legitimate and legal tax-
payers.
A dollar into the pockets ofthe tax cheats means another dollar
outofthe pockets ofthose who are obeyingthe law.
Or it means more infrastructure work delayed, rising construc-
tion costs, and fewerproductivity gains in transportation.
There is no reason, not one, to tolerate illegal fuel tax evasion.
The IRS, the Federal Highway Administration, and State offi-
cials should be putting the maximum effort into cracking down on
fuel tax evaders and increasing the revenue for the Highway Trust
Fund.
We are especially interested in hearing how the added resources
from ISTEAhave been used to fighttax evasion.
We also want to hear about any cooperative efforts on the part
ofFederal and State officials to increase enforcement efforts.
Every increase in the fuel taxmakes the practice ofevasion more
lucrative.
It is absolutely time for the maximum effort to put an end to or-
ganized taxevasion once and for all.
This committee made the fight against fuel tax evasion a priority
in ISTEA. Tax collection officials must do the same.
I am sure I speak for every Member of this committee when I
say we are eager to help root out the tax cheats and bring the
moneyinto the HighwayTrustFund.
(1)
—
I yield to the distinguished Ranking Member, the gentleman
from Oklahoma, Mr. Inhofe.
Mr. Inhofe. Thank you, Mr. Chairman. You do speak for every-
one on this committee.
Evasion offuel taxes is a $2.6-billion-a-year problem. We learned
from a recent infrastructure hearing that the number one need in
the public works arena is to rebuild the country's crumbling infra-
structure, which will require billions of dollars. Accordingly, we
can't afford to lose the $2.6 billion ayearto tax dodgers.
While I am encouraged with the progress that has been made fol-
lowing the enactment of ISTEA, I am concerned with the time it
has taken the IRS to get their enforcement programs moving.
Hopefully, Mr. Brand ofthe IRS will be able to reassure us oftheir
progress and lay out for us what the IRS is doing to improve com-
pliance.
Finally, Mr. Chairman, I would like to point out to the sub-
committee that one ofour witnesses, Mr. Pat Marchbanks, who is
here with us today, is representing the Truck Stop Operators and
owns a truck stop in Tulsa, Oklahoma; and I happened to be there
when the tornado came through and that was devastated, and
glad to see you are back and rebuilt now. But I am happy to report
that they are up and operating again after an extensive rebuilding;
and welcome to Washington, Mr. Marchbanks, and thank you for
sharingyourconcerns with this subcommittee.
Thankyou, Mr. Chairman.
Mr. BORSKI. The Chairthanks the gentleman.
The gentleman from Tennessee, Mr. Duncan.
Mr. Duncan. I have no statement.
Mr. BORSKI. I will submit for the record the statement of the
gentleman from Pennsylvania, Mr. Blackwell.
[Mr. Blackwell's prepared statement follows:]
StatementofCongressmanLucienE.Blackwell
Thankyou,Mr. Chairman. I wouldHketoapplaudyouforyoursincere,andtime-
lyleadershipinthesematters.
Reports declare that $2.6 billion has been lost due to fuel tax evasion, in 1993
alone. —
Accordingto a recent newspaper article in the Commonwealth ofPennsylvania,
fifteen people and two companies were indicted, for fuel-tax evasion resulting in a
total lossof$14.8 millionin federal and statediesel-fuel taxes. Thiswas oneofthe
largesttax-fraudcaseseverbroughtintheNortheast.
Ofthe indicted, one person was charged with failing to pay $329,660 in federal
excisetaxesonthousandsofgallonsofdieselfuel.
Accordingtoexperts, this is done by substitutinghome heatingoil fordiesel and
using a series offictitious distribution companies in a "daisy chain." Invoices from
each ofthese bogus intermediary companies state that the previous owner ofthe
productpaidthefueltaxes.
Tracing the fiiel back results in a dead end. Because these bootleggers have not
paid taxes on the product, they can sell it at much lower prices than legitimate
truck-stopoperators.
Mr. Chairman, I appreciateyourcontinuedeffortsinmovingthisprocessforward
towardsfindingworkablesolutionsthatwillresultinretrievingsomeofthesemuch
neededmoniesinshoring-upsomeoftheshortfallsinfinancingourhighways.
Mr. Chairman, in light ofthe serious challenges facing this committee, as we
wrestle with the shortfalls in the Highway Trust Fund Collections, I welcome the
witnesses whowillappearbeforeusthis morningandlookforwardtohearingtheir
testimony.
Finally,Mr. Chairman,withoutobjectionIwouldliketosubmitaspartofmytes-
timony several articles that furtheraddress some ofthese issues from theindustry
pointofview.
Thankyou,Mr.Chairman.
COVERFEATURE
Coping with cheats, change
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81 789
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